As a Result of Analytical Procedures Conducted During the Planning

question 67

Multiple Choice

As a result of analytical procedures conducted during the planning phase,the independent auditor determines that the gross profit percentage has declined from 30% in the preceding year to 20% in the current year.The auditor should

• A) Express an opinion that is qualified due to the inability of the client company to continue as a going concern.
• B) Evaluate management's performance in causing this decline.
• C) Require footnote disclosure.
• D) Consider the possibility of an error in the financial statements.

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Definitions:

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in the price of that good, indicating the sensitivity of demand to price changes.

Linear

Pertaining to a relationship or an equation that can be represented by a straight line in a graphical representation, illustrating a constant rate of change.

Downward-Sloping

A characteristic of a graph or curve that shows a decrease in one variable in response to an increase in another, commonly seen in demand curves.

Constant Elasticity

A condition in economics where the elasticity of one variable with respect to another is consistent across different levels of those variables.